HT (LON:HAT) announced record annual profits for 2010 this morning as the pawnbroking group continued to take advantage of surging gold prices. The UK’s leading pawnbroker by size of pledge book, Hamp;T had grown its retail estate to 180 outlets by year end comprising of both high street pawnbroking shops and gold purchasing bars.
Headline profits before tax surged almost 38% year on year to £25.5m and continued substantial cash generation enabled the group to pay down net debt to £27m from £42.3m a year earlier. Diluted earnings per share grew 26.6% to 47.52p putting the company on a price earnings multiple of under 7 times at last night’s close. The group announced a 17% increase in full year dividend to 9.5p giving a yield of 2.87%.
The boon to profits in 2010 has come from the company’s gold purchasing operation which was set up in reaction to the rampant gold price – Hamp;T’s ‘pop up’ Gold Bars buy discounted jewellery in shopping malls and other locations. Gold purchasing volumes added £20m to gross profit for the year, and while being quot;mindful of the sustainability of the margin in this segmentquot;, CEO John Nichols notes that gold purchasing volumes have remained relatively constant and Chairman Peter McNamara comments that quot;we still anticipate that this business sector will continue to be a significant contributor to profits in 2011quot;.
Finance Director Alex Maby highlighted the strong cash generation of the group in 2010 partly driven by the gold purchasing boon, which resulted in a material strengthening of the group’s balance sheet. The group had £17.1m in available funds and credit prompting Maby to state that the group is quot;well placed to fund any suitable acquisitionsquot;.
The core pawnbroking retail estate by 13 outlets in 2010 and the board sees the room for significant expansion expecting to open another 15-20 greenfield sites in 2011. Hamp;T is now the first pawnbroker to grow its pledge book to greater than £40m and underlying growth in this segment of the business grew by 7.7% year on year. Retail jewellery turnover increased 19.2% driven by expansion of the store estate.
In a recent Stockopedia Interview, John Nichols highlighted the group’s ambition to grow the pawnbroking estate from a current 135 to more than 250 outlets and still believes the market to be very fragmented. quot;Although there are no official statistics, the Board estimate there to be 500 – 750 locations around the UK where pawnbroking is offered as a core service, with an additional 1,000 – 1,500 locations where it is offered as an ancillary service. quot;